USA Beats India In WTO; Rematch Possible

John Brinkley
, ContributorI write about international trade and investment.Opinions expressed by Forbes Contributors are their own.

The United States may soon regret its victory this week in a trade dispute with India.

In a case filed by the Obama administration, a World Trade Organization dispute settlement panel ruled that India’s requirement that companies that sell solar power to the government use only domestically-made parts and components unfairly discriminated against American manufacturers.

But there are dozens of states and local governments in the United States that do what India does – they subsidize local renewable energy companies and in some cases require them to buy from local manufacturers.

People walk past a light powered by energy from a solar power microgrid at night in the village of Dharnai in Jehanabad, Bihar, India, on July 9, 2015. Photographer: Prashanth Vishwanathan/Bloomberg

There are 44 such programs in 23 states, and “China and India have already identified several of these programs as incompatible with WTO law,” says a December 2015 paper by Vanderbilt University Law School Professor Timothy Meyer.

One that India identified is California’s Self Generation Incentive Program, which offers a 20 percent discount to in-state businesses that install California-made solar panels or other renewable energy technologies.

The governments of Connecticut, Delaware, Illinois, and many other states also impose local content requirements on electric power companies.

The WTO’s Appellate Body ruled in 2013 that local content requirements were unlawful. It said an Ontario provincial government requirement that renewable power companies buy locally-made equipment discriminated against foreign suppliers.